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Summary: This bill eliminates the existing version of prime contracting and replaces it with a materials-only tax paid to the vendor or as Use tax on out-of-state purchases. Does not preempt cities from taxing Contracting. It moves Manufactured Buildings into a separate section. The bill creates a tax on Highways, Streets and Bridges. This construction activity would be assessed in the same manner as it is today. Preemption language prohibits local governments from imposing tax on this activity. It also creates a new Prime Contracting section with almost no deductions. Imposes a new 1% excise tax on 65% of the total contract cost. These monies are not shared. It addresses cities concerns about revenue shifts from job site to point of purchase by pooling a portion of each city’s total retail tax collections, redistributed back to cities based on a rolling average of net building permits:

a. For CY18, 4% of all retail tax revenues are placed in the sharing pool each month. This percentage will be adjusted semi-annually to reflect the Construction percentage of Arizona’s total GDP.

b. Cities and towns are required to report their net building permit values each month to ADOR. Each month they determine each city’s share of the total building permit values over the past 36 months, and use the resulting percentages to redistribute that month’s pool back to the cities and towns.

League Position:OPPOSE

UPDATES

2/15/2017: HB2521 passed out of House Ways and Means by a vote of 5-3. The bill now proceeds to the Rules Committee.